XOMA Butterfly Strategy
XOMA (XOMA Royalty Corp.), in the Healthcare sector, (Biotechnology industry), listed on NASDAQ.
XOMA Royalty Corp. functions as a specialist in aggregating biotechnology royalties, with its operations extending across Europe, the United States, and the Asia Pacific region. The company is dedicated to fostering advancements in human health by collaborating with biotechnology firms. Its core business model involves acquiring the anticipated future economic benefits, such as royalties and milestone payments, associated with pre-market therapeutic candidates that have already been licensed to pharmaceutical or biotechnology firms. The firm focuses its investments on early to mid-stage clinical assets, typically those in Phase 1 and 2 trials, selected for their robust commercial potential and because they are licensed to development partners. Its extensive portfolio currently encompasses around 70 distinct assets. The parent company, XOMA Corporation, established in 1981, has its main office in Emeryville, California.
XOMA (XOMA Royalty Corp.) trades in the Healthcare sector, specifically Biotechnology, with a market capitalization of approximately $528.6M, a trailing P/E of 15.91, a beta of 0.87 versus the broader market, a 52-week range of 22.29-42.81, average daily share volume of 211K, a public-listing history dating back to 1986, approximately 13 full-time employees. These structural characteristics shape how XOMA stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.87 places XOMA roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. XOMA pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a butterfly on XOMA?
A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration.
Current XOMA snapshot
As of June 30, 2026, spot at $42.42, ATM IV 111.50%, IV rank 56.03%, expected move 31.97%. The butterfly on XOMA below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 17-day expiry.
Why this butterfly structure on XOMA specifically: XOMA IV at 111.50% is mid-range versus its 1-year history, so strategy selection should anchor more to the directional thesis than to the IV regime, with a market-implied 1-standard-deviation move of approximately 31.97% (roughly $13.56 on the underlying). The 17-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated XOMA expiries trade a higher absolute premium for lower per-day decay. Position sizing on XOMA should anchor to the underlying notional of $42.42 per share and to the trader's directional view on XOMA stock.
XOMA butterfly setup
The XOMA butterfly below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With XOMA near $42.42, the first option leg uses a $40.30 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed XOMA chain at a 17-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 XOMA shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 1 | Call | $40.30 | N/A |
| Sell 2 | Call | $42.42 | N/A |
| Buy 1 | Call | $44.54 | N/A |
XOMA butterfly risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit.
XOMA butterfly payoff curve
Modeled P&L at expiration across a range of underlying prices for the butterfly on XOMA. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
When traders use butterfly on XOMA
Butterflies on XOMA are pinning bets - traders use them when they expect XOMA to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
XOMA thesis for this butterfly
The market-implied 1-standard-deviation range for XOMA extends from approximately $28.86 on the downside to $55.98 on the upside. A XOMA long call butterfly is a pinning play: it pays maximum at the middle strike if XOMA settles there at expiration, with the wing legs capping both the cost and the maximum loss to the net debit. Current XOMA IV rank near 56.03% is mid-range against its 1-year distribution, so the IV signal is neutral; the butterfly thesis on XOMA should anchor more to the directional view and the expected-move geometry. As a Healthcare name, XOMA options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to XOMA-specific events.
XOMA butterfly positions are structurally neutral / pin (limited-risk, limited-reward); the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. XOMA positions also carry Healthcare sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move XOMA alongside the broader basket even when XOMA-specific fundamentals are unchanged. Always rebuild the position from current XOMA chain quotes before placing a trade.
Frequently asked questions
- What is a butterfly on XOMA?
- A butterfly on XOMA is the butterfly strategy applied to XOMA (stock). The strategy is structurally neutral / pin (limited-risk, limited-reward): A long call butterfly buys one lower-strike call, sells two ATM calls, and buys one higher-strike call, paying a small net debit for a defined-risk position that maxes out if the underlying pins the middle strike at expiration. With XOMA stock trading near $42.42, the strikes shown on this page are snapped to the nearest listed XOMA chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are XOMA butterfly max profit and max loss calculated?
- Max profit equals the wing width minus net debit times 100 (reached when the underlying pins the middle strike); max loss equals the net debit times 100. Two breakevens at lower-wing plus debit and upper-wing minus debit. For the XOMA butterfly priced from the end-of-day chain at a 30-day expiry (ATM IV 111.50%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a XOMA butterfly?
- The breakeven for the XOMA butterfly priced on this page is no defined breakeven on the modeled curve at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current XOMA market-implied 1-standard-deviation expected move is approximately 31.97%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a butterfly on XOMA?
- Butterflies on XOMA are pinning bets - traders use them when they expect XOMA to settle near a specific level at expiration (often the prior close, a round number, or the max-pain strike) and want defined-risk exposure to that outcome.
- How does current XOMA implied volatility affect this butterfly?
- XOMA ATM IV is at 111.50% with IV rank near 56.03%, which is mid-range against its 1-year history. Strategy selection depends more on directional thesis and expected move than on a strong IV signal.